Karachi, December 1, 2024 – The Federal Board of Revenue (FBR) has reaffirmed its advance income tax policy on the sale of property and goods through auctions for the tax year 2025. The FBR has announced that the existing tax rates will remain unchanged, ensuring consistency in its approach to revenue collection under Section 236A of the Income Tax Ordinance, 2001.
Scope of Section 236A
Section 236A mandates the collection of advance income tax from individuals or entities involved in property and goods transactions conducted through public auction or tender. This applies to a variety of sellers, including:
1. Government and local authorities.
2. Foreign contractors or consultants.
3. Companies and consortiums.
4. Customs or Inland Revenue collectors.
The tax is computed on the gross sale price and is collected from the buyer at the time of the transaction. Notably, auctions involving confiscated or attached goods, as well as the renewal of licenses previously awarded through auction or tender, also fall within the scope of this provision.
If payments are made in installments, advance tax is collected with each installment to ensure compliance and consistent revenue collection.
Tax Credits and Final Taxation
Buyers are eligible for a credit on the advance tax paid in the year of purchase, subject to specific provisions. For taxpayers falling under Sections 98B or 145, the credit applies to the relevant tax year as determined by the timeline outlined in these sections.
However, in cases involving the lease of toll collection rights, the tax collected is considered final, with no further adjustments or credits applicable.
Tax Rates for Auctions
The advance income tax rates vary depending on the nature of the property and the taxpayer’s compliance status:
1. Goods and property (excluding immovable property):
• ATL-listed individuals: 10% of the gross sale price.
• Non-ATL individuals: 20% of the gross sale price.
2. Immovable property and train management services auctioned by Pakistan Railways:
• ATL-listed individuals: 5% of the gross sale price.
• Non-ATL individuals: 10% of the gross sale price.
Broader Implications
These provisions emphasize the government’s commitment to increasing tax compliance and broadening the tax base. By imposing higher tax rates on non-compliant individuals not listed on the Active Taxpayers List (ATL), the FBR aims to incentivize registration and discourage tax evasion.
This policy, though stringent, reflects the FBR’s ongoing efforts to optimize revenue collection while ensuring fairness in the taxation process. It plays a crucial role in stabilizing Pakistan’s fiscal framework amidst economic challenges.